l The accounting method shall be the same as in case of twice distribution.

l For both cases of twice distribution and multi-time distribution, the accountants must monitor in detail each expense item so as to ensure that the total distributed expenses are compatible with the arising expenses and made to the right expense-bearing objects.

- For the payable amounts of interest on financial-leasing fixed assets, when acknowledging debts with the lessors, recording:

Debit Account 212 - Financial-leasing fixed assets (the current prices of fixed assets)

Debit Account 133 - Deducted VAT (if any)

Credit Account 342 - Long-term debts (debt principals payable to fixed asset lessors)

- For cases of advance payment of financial-leasing fixed asset rentals for many years, recording:

Debit Account 242 - Long-term prepaid expenses

Credit Accounts 111, 112

Periodically distributing the payable interests on financial-leasing fixed assets into financial operation expenses, recording:

Debit Account 635 - Financial expenses

Credit Account 242 - Long-term prepaid expenses

- For cases of expenses for overhaul of fixed assets, to distribute expenses into many business periods when the overhaul is completed:

l Transferring the overhaul expenses into the long-term prepaid expense account, recording:

Debit Account 242 - Long-term prepaid expenses

Credit Account 241 - Unfinished capital construction (2413)

l Accounting and distributing expenses for fixed asset overhauls into business expenses in the accounting periods of the relevant fiscal year, recording:

Debit Accounts 627, 641, 642,�

Credit Account 242 - Long-term prepaid expenses

l Reflecting the cost prices of export goods of tax-suspension warehouses, recording:

Debit Account 632 - The cost prices of sold goods

Credit Account 158 - Tax-suspension warehouse goods

l Reflecting turnover of export goods of tax-suspension warehouses, recording:

Debit Accounts 111, 112, 131

Credit Account 511 - Sale turnover

Credit Account 333 - Taxes and amounts payable to the State

[3333 - Export tax (if any)]

e) If the export rate is lower than the tax-suspension rate, the enterprises shall have to pay import tax and VAT on import goods (if any) for the difference between the volume of products to be exported and the volume of products actually exported, for which the enterprises have to pay import tax and VAT on imported goods (if any):

l When determining the payable import tax (if any), recording:

Debit Account 632 - The cost price of sold goods

Credit Account 333 (3333) - Taxes and amounts payable to the State (Import tax)

l When determining VAT on imported goods (if any), recording:

Debit Account 133 - Deducted VAT (1332)

Credit Account 333 (33312) - Taxes and amounts payable to the State (VAT on imported goods)

l When actually paying import tax and VAT on imported goods (if any), recording:

Debit Account 333 (3333) - Taxes and amounts payable to the State (Import tax)

Debit Account 333 (33312) - Taxes and amounts payable to the State (VAT on imported goods)

Credit Accounts 111, 112

f) Where enterprises are permitted by the Trade Ministry to sell tax-suspension warehouse goods in Vietnamese markets, the enterprises shall have to pay the import tax and other taxes as prescribed.

l When permitted to use tax-suspension warehouse goods, the enterprises must carry out procedures for the export of goods from their tax-suspension warehouses and pay import tax for such goods, recording:

Debit Accounts 155, 156, 632

Credit Account 158 - Tax-suspension warehouse goods

And at the same time, they have to pay import tax on these goods and raw materials:

l When determining the payable import tax (if any), recording:

Debit Accounts 155, 156, 632

Credit Account 333 (3333) - Taxes and amounts payable to the State (Import tax).

l When determining VAT on imported goods (if any), recording:

Debit Account 133 - Deducted VAT (1332)

Credit Account 333 (33312) - Taxes and amounts payable to the State (VAT on imported goods).

l When actually paying the import tax and VAT on imported goods, recording:

Debit Account 333 - Taxes and amounts payable to the State (if any)

(3333- Import tax)

Credit Accounts 111, 112

g) Where raw materials and/or products kept at tax-suspension warehouses are delivered for sale on the domestic market:

l Reflecting the cost prices of the raw materials and/or products delivered from tax-suspension warehouses for sale, recording:

Debit Account 632 - Cost price of goods on sale

Credit Account 158 - Tax - suspension warehouse goods.

At the same time, paying import tax on those goods and raw materials and accounting like the above entries.

l Reflecting the turnover of those goods delivered for sale on domestic market, recording:

Debit Accounts 111, 112, 131

Credit Account 511 - Turnover of goods sale and service provision.

Credit Account 333 - Taxes and amounts payable to the State (33311)

h) Where the tax-suspension warehouse goods decay and/or deteriorate in their quality, failing to satisfy the export requirements, such goods must be re-exported or destroyed:

l In case of re-import, recording

Debit Accounts 155, 156

Credit Account 158 - Tax-suspension warehouse goods

At the same time, the import tax must be paid on these goods and raw materials, determining the payable import tax, recording like entries in (f); when actually paying tax, recording:

Debit Account 333 - Taxes and amounts payable to the State (if any)

(3333 - Import tax)

Credit Accounts 111, 112

l In case of re-export, recording:

Debit Account 331 - Payable to sellers

Debit Account 333 (3333) - Taxes and amounts payable to the State (VAT on imported goods)

Credit Account 158 - Tax-suspension warehouse goods

l In case of destruction of goods, raw materials kept at tax-suspension warehouses, recording:

Debit Account 632 - Cost prices of goods (destroyed goods, raw materials)

Credit Account 158 - Tax- suspension warehouse goods

l If allowed not to pay import tax on the destroyed goods and/or raw materials, recording:

Debit Account 333 - Taxes and amounts payable to the State (if any)

(3333- Import tax, 33312 - VAT on imported goods)

Credit Account 158 - Tax-suspension warehouse goods (the payable import tax amount).

III. GUIDING THE ACCOUNTING OF A NUMBER OF PARTICULAR ECONOMIC OPERATIONS

1. Accounting and handling the exchange rate differences

1.1. Exchange rate differences and handling thereof

1.1.1. Exchange rate differences:

The currency used in book-keeping entries at units is Vietnam dong, or possibly foreign currency approved by the Finance Ministry for book-keeping entries and making of accounting reports.

If enterprises use currency other than those used in making book-keeping entries, when converting the other currencies into those used for recording the accounting books, the exchange rate differences shall arise.

The exchange rate differences are the differences arising from the conversion of an amount of other currencies into the currencies used in book-keeping entries at different exchange rates.

The exchange rate differences arise mainly in the following cases:

a) The exchange rate differences actually arising in the period (the implemented exchange rate differences) mean the differences between the other currencies and those used for recording accounting books at different exchange rates. Such differences often arise in transactions of buying and selling goods and services; repayment of payable debts, advance for goods purchases, or provision of loans in currencies other than those used for recording accounting books. For the above-mentioned cases, the exchange rates between the other currencies and the currencies used for recording the accounting books shall be inscribed according to the exchange rates of the transaction day (the actual transaction exchange rates or the inter-bank average exchange rate announced by the State Bank at the time when the transactions arise).

The principle for primary accounting of a transaction in foreign currency is that it must be recorded according to the exchange rate between the currency used for book-keeping entries and the other currencies on the transaction days.

There are two kinds of exchange rate differences actually arising in the period (the implemented exchange rate) at the enterprises:

l The exchange rate difference actually arising in the period from capital construction activities (pre-operation period);

l The exchange rate difference actually arising in the period from business activities.

b) The exchange rate difference on the day of making the accounting balance sheet at the end of the fiscal year (December 31) annually:

At this time, the money items (the balance of cash accounts, bank deposits, receivable debts, payable debts simultaneously reflected in the currencies used for book-keeping entries and in currencies other than the currencies used for book-keeping entries) must be reported in the exchange rate at the end of the fiscal year (December 31). Therefore, at such time (December 31), the enterprises must re-evaluate the money items at the exchange rate at the end of the fiscal year according to the inter-bank average exchange rate announced by the State Bank on December 31 every year.

The exchange rate differences on the date of making the accounting balance sheet at the end of the fiscal year (December 31) due to the re-evaluation of money items shall also be divided into two types:

l The exchange rate difference on the date of making the accounting balance sheet at the end of the fiscal year (December 31) due to the re-evaluation of money items related to construction investment stage;

l The exchange rate difference on the date of making the accounting balance sheet at the end of the fiscal year (December 31) due to the re-evaluation of the money items related to the production and business stage.

c) For the enterprises which use financial instruments as reserves for foreign exchange risks, the borrowed amounts and payable debts in foreign currencies shall be accounted according the actually arising exchange rates. The enterprises must not re-evaluate the borrowed amounts and payable debts in foreign currencies, for which the financial instruments have been used as reserves for foreign exchange risks.

1.1.2. Handling of exchange rate differences:

a) The exchange rate differences arising in the period and differences arising from the re-evaluation at the end of the period, which are related to production and business activities, shall be handled as follows:

The entire exchange rate differences arising in the period and the exchange rate differences arising from the re-evaluation at the year-end (December 31) or the last day of the fiscal year other than the calendar year (already approved) of the money items shall be memorized directly into expenses for or income from the financial activities on the business result report of the fiscal year.

Enterprises must not divide profits on interests on the exchange rate differences arising from re-evaluation at the end of the fiscal year of the money items.

b) The exchange rate differences arising in the period and the differences arising from re-evaluation at the end of the period, which are related to construction investment activities (pre-operation stage), shall be handled in two following steps:

Step 1: While in the construction investment period, the implemented exchange rate differences and the exchange rate differences arising due to re-evaluation at the end of the fiscal year of the monetary item (December 31) (loss or profit) shall be reflected in accrual on the accounting balance sheet (Item Account 413 - Exchange rate difference).

Step 2: Upon the completion of the construction investment process:

- The exchange rate differences actually arising in the construction investment period (exchange rate loss or profit) shall not be calculated into the value of fixed assets but fully carried over into the financial operation expenses or incomes in the fiscal year when the fixed assets and investment assets are put into operation.

- The exchange rate differences arising due to the re-evaluation of monetary items at the time of final settlement, hand-over of fixed assets for putting into operation (exchange rate loss or profit) shall not be calculated into the value of fixed assets but distributed into financial operation income or expenses of the subsequent business periods with the maximum duration of 5 years (as from the time the projects are put into operation), which must conform to the utility duration of the fixed assets.

1.2. Accounting of exchange rate differences and accounting of the handling of exchange rate differences.

1.2.1. Accounting of exchange rate differences arising in the period:

1.2.1.1. Accounting and handling of exchange rate differences arising in the period of business activities:

a) When buying goods, services:

- If exchange rate losses arise in the transaction of purchasing goods and/or services, recording:

Debit Accounts 151, 152, 153, 156, 157, 211, 213, 627, 641, 642,� (the exchange rate on the transaction date)

Debit Account 635 - Financial expenses (exchange rate losses)

Credit Accounts 111 (1112), 112 (1122) (the average exchange rate, advance import or export exchange rates).

- If exchange rate profits arise in the transactions of purchasing goods and/or services from the outside, recording:

Debit Account 151, 152, 153, 156, 157, 211, 213, 627, 641, 641,� (the exchange rate on transaction date)

Credit Account 111 (1112), 112 (1122) (the average exchange rate; the advance import or export exchange rates)

Credit Account 515 - Financial operation turnover (exchange rate profits)

b) When paying the payable debts (debts payable to sellers, long-term and short-term loan debts, internal loan debts,�):

- If exchange rate losses arise in debt-repayment transactions, recording:

Debit Accounts 331, 311, 315, 341, 342, 336,� (actual exchange rate on transaction date)

Debit Account 635 - Financial expenses (exchange rate losses)

Credit Accounts 111 (1112), 112 (1122) (the average exchange rate; the advance import or export exchange rates).

- If exchange rate profits arise in debt-repayment transaction, recording:

Debit Accounts 331, 311, 315, 341, 342, 336,� (actual exchange rate on the transaction date)

Credit Account 515 - Financial operation turnover (exchange rate profits)

Credit Account 111 (1112), 112 (1122) (average exchange rate; advance import or export exchange rates)

c) Upon recovery of receivable debts (from customers, from internal subjects,�)

- If exchange rate difference losses arise in the transactions of receivable debt repayment, recording:

Debit Accounts 111 (1112), 112 (1122) (the exchange rate of the transaction date)

Debit Account 635 - Financial expenses (exchange rate losses)

Credit Accounts 131, 136 (the actual exchange rates)

- If exchange rate difference profits arise in transaction of receivable debt repayment, recording:

Debit Account 111 (1112), 112 (1122) (the exchange rate of the transaction date)

Credit Account 515 - Financial operation turnover (exchange rate profits)

Credit Accounts 131, 136 (the actual exchange rates)

d) When turnovers, other incomes arise in currency units other than those used for book-keeping entries, recording:

Debit Accounts 111 (1112), 112 (1122), 131, 138 (the exchange rate of the transaction date)

Credit Accounts 511, 711 (the exchange rate of the transaction date)

1.2.1.2. Accounting and handling of exchange rate differences arising in the period of investment activities:

a) When buying from the outside goods, services, fixed assets, equipment, construction and/or installation volumes handed over by contractors:

- If exchange rate difference losses arise in transactions of payment for the purchase from the outside of goods, services, fixed assets, equipment, construction and/or installation volumes handed over by contractors, recording:

Debits Accounts 151, 152, 211, 213, 241,� (the exchange rate of the transaction date)

Debit Account 413 - Exchange rate difference (4131) (exchange rate losses)

Credit Accounts 111 (1112), 112 (1122) (the average exchange rate; or the advance import/export exchange rates)

- If exchange rate difference profits arise in transactions of purchase from the outside of goods, services, fixed assets, equipment, construction and/or installation volumes handed over by contractors, recording:

Debit Accounts 151, 152, 211, 213, 241,� (the exchange rate of the transaction date)

Credit Accounts 111 (1112), 112 (1122) (the average exchange rate, or the advance import/export exchange rates)

Credit Accounts 413 - Exchange rate differences (4131) (exchange rate profits)

b) When repaying payable debts {debts payable to sellers, long-term and short-term loan debts, internal loan debts (if any),�}:

- If exchange rate difference losses arise in transactions of repayment of payable debts, recording:

Debit Accounts 331, 311, 315, 341, 342, 336,� (actual exchange rate)

Debit Account 413- Exchange rate difference (4131) (exchange rate losses)

Credit Accounts 111 (1112), 112 (1122) (average exchange rate, the advance import/export exchange rates)

- If exchange rate difference profits arise in transactions of repayment of payable debts, recording:

Debit Accounts 331, 311, 315, 341, 342, 336,� (actual exchange rate)

Credit Accounts 111 (1112), 112 (1122) (average exchange rate, advance import/export exchange rates)

Credit Accounts 413 - Exchange rate difference (4131) (exchange rate profits)

c) The exchange rate differences (losses or profits) arising in the investment period, which are accrued in the investment period till the time of making final settlement and putting the projects into operation, shall be handled by transferring the entire Debit balance or Credit balance of Account 413- Exchange rate difference- into financial expenses or financial operation turnover in the year.

- Carrying over the entire exchange rate difference losses arising in the investment period into the financial expenses of the fiscal year when the investment projects start operating commercially, recording:

Debit Account 635 - Financial expenses

Credit Account 413 - Exchange rate difference (4131) (exchange rate losses having already arisen)

- Carrying over the entire exchange rate difference profits having arisen in the investment period into the financial income of the fiscal year when the investment projects start operating commercially, recording:

Debit Account 413 - Exchange rate difference (4131) (exchange rate profits having already arisen)

Credit Account 515 - Financial operation turnover.

1.3.2. Accounting of year-end re-evaluation exchange rate differences

a) Accounting of year-end re-evaluation exchange rate differences:

At the time (December 31) the enterprises have to re-evaluate the money items of foreign currency origins (currencies other than those officially used in book-keeping) at the exchange rate at the end of the fiscal year (December 31) according to the inter-bank average exchange rate announced by the State Bank on December 31 every year, the exchange rate differences (profits or losses) may arise. The enterprises shall have to detail the exchange rate differences arising due to the re-evaluation of these money items of the capital construction investment activities (pre-production and business stage) (4131) and the production and business activities (4132):

- If exchange rate profits arise, recording:

Debit Accounts 111 (1112), 112 (1122), 131, 136, 138, 311, 315, 331, 341, 342,�

Credit Account 413 - Exchange rate difference (4131, 4132)

- If exchange rate losses arise, recording:

Debit Account 413 - Exchange rate difference (4131, 4132)

Credit Accounts 111 (1112), 112 (1122), 131, 136, 138, 311, 315, 331, 341, 342,�

b) Handling of year-end re-evaluation exchange rate differences:

b1) Handling of exchange rate differences arising from the year-end re-evaluation of money items of production and business activities:

Enterprises may handle the year-end re-evaluation exchange rate differences by the following method:

Transferring the entire year-end re-evaluation exchange rate differences into financial expenses (in case of exchange rate losses) or the financial operation turnovers (in case of exchange rate profits) to determine the business operation results:

- Transferring the year-end re-evaluation exchange rate difference profits into financial operation turnovers, recording:

Debit Account 413 - Exchange rate difference (4131)

Credit Account 515 - Financial operation turnover (exchange rate profits)

- Transferring the year-end re-evaluation exchange rate difference losses into financial expenses, recording:

Debit Account 635 - Financial expenses (exchange rate losses)

Credit Account 413 - Exchange rate difference (4131)

It is noted that the exchange rate differences not yet implemented do not serve as basis for determining the business profit amounts to be divided to capital-contributing parties.

b2) Handling of the exchange rate differences arising from the year-end re-evaluation of money items of capital construction investment activities:

- At the stage of on-going capital construction investment when enterprises have not yet commenced their operation, the year-end re-evaluation exchange rate differences shall not be handled but reflected on Account 413- Exchange rate difference, the Debit balance, or Credit balance shall be reflected on the accounting balance sheet.

- At the stage of investment completion, starting production and business activities, the Debit balance or Credit balance on Account 413- Exchange rate differences reflecting the exchange rate differences arising from the re-evaluation of money items at the end of each fiscal year (excluding the re-evaluation of money items related to construction investment activities at the time of handing over the assets for putting into operation) shall be handled as follows:

l Transferring the Debit balance Account 413 - Exchange rate differences (4132) to Account 242- Long-term prepaid expenses for gradual distribution of the exchange rate loss amounts of the construction investment stage into the subsequent fiscal years for 5 years at most (as from the time the projects are put into operation) into financial expenses:

Debit Account 242 - Long-term prepaid expenses

Credit Account 413 - Exchange rate difference (4132)

l Transferring the Credit balance Account 413 - Exchange rate differences (4132) to Account 335- Payable expenses for gradual distribution of the exchange rate profits of the construction investment stage into the subsequent fiscal years for 5 years at most (as from the time the projects are put into operation) into the financial operation turnovers:

Debit Account 413 - Exchange rate difference (4132)

Credit Account 335 - Payable expenses

2. Accounting and handling relevant matters when converting the book-keeping entry monetary units being Vietnam dong into another book-keeping entry currency and vice versa.

2.1. Principle for currency conversion

- Enterprises may convert the book-keeping entry currency being Vietnam dong into another book-keeping entry currency and vice versa when so approved by the Finance Ministry.

- The conversion of the book-keeping entry currency being Vietnam dong into another book-keeping entry currency and vice versa may be effected only when the new fiscal year begins.

- Depending on the nature of each item on the accounting balance sheet, the conversion of one book-keeping entry currency into another book-keeping entry currency shall be effected according to the following order and principles:

a) Order:

- Closing books, making the accounting balance sheet according to the current book-keeping entry currency;

- Making entries to adjust differences due to the conversion of the current book-keeping entry currency into a new book-keeping entry currency (below the line for account-closing total);

- Making addition of the above difference-adjusting entries;

- Making the accounting balance sheet according to the new currency.

b) Principles:

- The cost prices of fixed assets and depreciation of fixed assets shall be converted at the exchange rate on the date of purchasing the assets or the date of handing them over for putting into operation (for fixed assets formulated through construction investment), or evaluation of fixed assets (for fixed assets calculated according to the value of re-evaluation of fixed assets).

- The value of goods in stock shall be converted according to the exchange rate at the time the expenses arise, or the average quarterly exchange rate, or the period-end exchange rate (at the time of conversion).

- The receivable debts or payable debts shall be converted according to the exchange rate on the date when the value of receivable or payable debts is determined (for receivable debts or payable debts in currencies other than the book-keeping entry currency), or the period-end exchange rate (at the time of conversion).

- The contributed capital of owners and reserve funds belonging to the capital of owners, undistributed profits shall be converted according to the period-end exchange rate (at the time of conversion).

- Capital amounts in money (cash, bank deposits) shall be converted according to the period-end exchange rate (at the time of conversion).

l The exchange rate differences (profits or losses) arising when converting the book-keeping entry currency being Vietnam dong into another book-keeping entry currency or vice versa shall not be accounted into the business result reports but must be classified and considered a separate part of the owners� capital and handled upon the liquidation of enterprises.

l When using currency other than Vietnam dong, or changing the book-keeping entry currency, the reasons therefor must be clearly stated in the financial report explanation.

2.2. Accounting and handling of exchange rate differences arising upon the conversion of the book-keeping entry currency being Vietnam dong into another book-keeping entry currency and vice versa:

2.2.1. Accounting the exchange rate differences arising upon the conversion of the book-keeping entry currency being Vietnam dong into another book-keeping entry currency and vice versa:

- Where the exchange rate difference losses arise upon the conversion of the book-keeping entry currency being Vietnam dong into another book-keeping entry currency and vice versa, recording:

Debit Accounts 111, 112, 131, 142, 211, 213,�

Debit Account 413 - Exchange rate difference

Credit Accounts 311, 331, 338, 411, 415, 421,�

- Where exchange rate difference profits arise upon the conversion of the book-keeping entry currency being Vietnam dong into another book-keeping entry currency and vice versa, recording:

Debit Accounts 111, 112, 131, 142, 211, 213,�

Credit Accounts 311, 331, 338, 411, 415, 421,�

Credit Account 413 - Exchange rate difference.

2.2.2. Accountants handle the exchange rate differences arising upon the conversion of the book-keeping entry currency being Vietnam dong into another book-keeping entry currency and vice versa:

- Handle the exchange rate difference losses, recording:

Debit Account 412 - Asset- revaluation difference (4122)

Credit Account 413 - Exchange rate difference (exchange rate losses).

- Handle the exchange rate difference profits, recording:

Debit Account 413 - Exchange rate difference (exchange rate profits)

Credit Account 412 - Asset- revaluation difference (4122)

The Credit balance or Debit balance of Account 412 - Asset-revaluation difference (4122) shall be reflected on the accounting balance sheet and handled upon the liquidation of enterprises (when ending the business duration under the investment licenses or when the enterprises go bankrupt,�)

3. Conversion in financial reports at requests of parent companies

- Where enterprises use Vietnam dong as the book-keeping entry currency, when converting the currency used for making financial reports into a foreign currency at the requests of their parent companies, the following principles must be observed:

l Assets, receivable debts, payable debts, capital of owners of money and non-money items shall all be converted at the period-end exchange rate.

l Income and expense items of the business result reports shall be converted at the exchange rate of the transaction date.

l All exchange rate differences arising from the conversion of the currency used for making financial reports into a foreign currency to integrate the financial reports shall be classified as capital of owners till the enterprises are liquidated.

- At the reporting enterprises (affiliate companies), the exchange rate differences arising from the conversion of the financial report-making currency into a foreign currency at the requests of their parent companies must not be reflected into the accounting-book system and the financial reports of the affiliate companies.

4. Accounting of the setting up and return of reserves for stock price decrease, receivable bad debts

4.1. Accounting of stock price decrease reserve

a) Deduction for setting up stock price decrease reserve

The stock price decrease reserve is the reserve for the expected lost value which shall affect the production and business results due to the decrease of prices of supplies, finished products, stock merchandises under the enterprises� ownership and may happen in the plan year (price drop, poor quality, outmoded,�). Enterprises must have firm evidences on price decrease which may happen in the subsequent fiscal year (on December 31) for use as basis for determining the stock price decrease reserve set up on December 31 and accounted into expenses of the fiscal year.

At the end of the accounting year, upon realizing that the market prices of raw materials, materials, commodities and finished products left in stock are lower than the prices inscribed on the accounting books, the stock price decrease reserve must be set up.

The enterprises must base themselves on the situation of price fall, the actual quantity of each kind of raw materials, materials, commodity, finished products left in stock to determine the levels of reserve for stock price decrease according to the following formula:

The reserve level The quantity of The
for decrease of supplies, commodities accounting The actual market
prices of supplies, = left in stock at the x prices on - prices at the time
commodities time of December 31 accounting of December 31
for the plan year of the reporting year books

The enterprises shall determine the amount of year-end stock price decrease reserve or reimbursement for inclusion into the cost prices of sold goods; or have to re-enter the cost-price decrease of sold goods of the fiscal year.

b) Accounting of stock price decrease reserves

At the end of the accounting year, the enterprises shall base themselves on the situation of price drop of the actual stock quantities, account and determine the new deduction level for setting up reserve or make addition to the set-up stock price decrease reserves {(if the reserve amount of the current year is larger than the reserve amount of the previous year (>0)}, recording:

Debit Account 632 - Cost prices of sold goods

Credit Account 159 - Stock price decrease reserve

Or, if the reserve amount to be set up in the current year is smaller than the reserve amount of the previous year (0<), the accountants shall re-enter the value difference between the reserve already set up at the end of the previous year and the reserve set up at the end of the current year, recording:

Debit Account 159 - Stock price decrease reserve

Credit Account 632 - Cost prices of sold goods

4.2. Accounting of the setting up of receivable bad debt reserves

a) Deduction for setting up receivable bad debt reserves

The receivable bad debt reserve is the reserve for the expected lost value of receivable bad debts which may not be reclaimed due to the fact that the debtors are incapable of repaying them and may happen in the plan year.

Enterprises shall set up reserves for receivable bad debts which have turned due for one year or more and not yet recovered though the enterprises have many times asked for the repayment thereof, or the debts which have turned due for less than one year but cannot be repaid by debtors as evidenced by signs.

At the end of the fiscal year, enterprises must calculate and determine the new reserve amount, the reserve supplements or re-enter the reserves set up in the previous year as increase or decrease of the cost prices of retail goods in order to determine the business results of the fiscal year.

Bad debts with one of the following evidences may be written off:

* For debtors being legal persons:

l Court decisions declaring the enterprises� bankruptcy according to the Law on Enterprise Bankruptcy and the results of property division by courts;

l Decisions of competent bodies on dissolution of enterprises and the results of division of liquidated property by the competent bodies.

* For debtors being individuals:

l The debtors still exist but cannot repay their debts as proved by evidences;

l The debtors have fled away;

l The debtors have died.

After handling those debts by crossing them from books, enterprises should continue to monitor those debts on accounts outside the accounting balance sheets.

b) Accounting of receivable bad debts reserves

- At the end of the accounting year, the enterprises shall base themselves on their receivable bad debts, anticipate amounts of loss which may occur in the plan year and the accountants shall determine the new reserve levels or the additional reserves for receivable bad debts (if the reserve set up in the current year is larger than the reserve set up in the preceding year), recording:

Debit Account 642 - Enterprise management expenses

Credit Account 139 - Receivable bad debt reserve

- At the end of the fiscal year, the accountants shall re-enter the receivable bad debt reserves (if the reserves set up in the current year is smaller than the reserve set up in the preceding year) as the decrease of the cost prices of sold goods, recording:

Debit Account 139 - Receivable bad debt reserves

Credit Account 642 - Enterprise management expenses

- When determining that debts are irrecoverable (with decisions to write off debts), making entries by crossing those debts from books, recording:

Debit Account 642 - Enterprise management expenses

Credit Account 131 - Receivable from customers

Credit Account 138 - Other receivable.

�����.

At the same time, continuing to monitor them on Account 004 - Handled bad debts (Account outside the accounting balance sheet) in order to monitor them within prescribed duration so as to be able to retrospectively collect them from customer-debtors, recording:

Debit Account 004 - Handled bad debts

- For receivable bad debts which have already been remitted, if later such handled bad debts are retrospectively collected, the accountants shall base on the actual value of the recovered debt amounts, recording:

Debit Accounts 111, 112

Credit Account 711 - Other income

At the same time, making single entry:

Credit Account 004 - Handled bad debts.

5. Accounting of business capital contribution

5.1. Contribution of legal capital

In principle, the legal capital shall be reflected according to investment licenses and actual tempo of capital contribution. Parties may contribute legal capital in foreign currencies, Vietnamese currency, equipment and machinery, workshops or other constructions, industrial property right value, technical know-how, technological process, technical services, or land use right value, resources, the use value of water surface, sea surface, equipment and machinery, workshops and other constructions, industrial property right value, technical know-how, technological process (according to Articles 7 and 9 of the Law on Foreign Investment in Vietnam). In cases of capital contribution with work-shops, equipment, intangible fixed assets, the independent evaluation thereof is required according to the market prices at the time of capital contribution. The result of each capital contribution drive must be approved by the Managing Board. In the course of their operations, enterprises must not reduce their legal capital.

The currency used for book-keeping entries of actually contributed capital are Vietnam dong or a foreign currency already approved by the Finance Ministry.

The conversion of foreign currencies into Vietnamese currency or vice versa shall be effected at the exchange rates officially announced by Vietnam State Bank at the time of capital contribution and according to the actual tempo of legal capital contribution.

Enterprises must not re-evaluate the legal capital, even in case of exchange rate difference, for recording the legal capital increase or decrease.

When enterprises receive legal capital actually contributed by the parties as prescribed in the investment licenses, they must base on the exchange rates at the time of capital contribution in Vietnam dong or foreign currencies approved by the Finance Ministry to acknowledge the contributed capital for investment, recording:

Debit Account 211 - Tangible fixed assets (equipment and machinery, workshops, other constructions)

Debit Account 213 - Intangible fixed assets (industrial property right value, technical know-how, technological process, land use right value, resources, use value of water surface, sea surface)

Debit Accounts on Expenses or Account 242 - Long-term prepaid expenses (technical services)

Debit Accounts 111 (1111,1112), 112 (1121, 1122) (Foreign currencies, Vietnamese currency)

Credit Account 411 - Business capital sources (detailed monitoring for capital-contributing parties)

5.2. Contribution of investment capital other than legal capital

Of the total investment capital for execution of investment projects, apart from the legal capital, the capital-contributing parties may borrow long-term or short-term capital to supplement the sources of capital for investment in projects (borrowing from their parent companies, banks or financial institutions). The investment capital other than legal capital, transferred by capital-contributing parties to the contributed capital-receiving companies, must not be recorded into the legal capital but into the borrowed capital or debts owed to the parent companies. Depending on whether the borrowed capital or debts owned to the parent companies are short-term loans of under one year or over one year, they shall be properly reflected on Account 336- Internally payable (borrowing or short-term debts from the parent companies); Account 341- Long-term loans (long-term loans or debts from the parent companies).

Based on the exchange rates applicable to other contributed investment capitals (according to the average inter-bank exchange rate announced by Vietnam State Bank at the time the economic operation arises, or the actual exchange rates of the arising economic operations) according to Vietnam dong, or a foreign currency approved by the Finance Ministry at the time of capital contribution, recording:

Debit Accounts 111, 112, 152, 211,�

Credit Accounts 336, 341

The rate of payable lending interests, if any, on loans for investment in projects, excluding the lending interest rate on loans for contribution of legal capital (if capital is borrowed to contribute legal capital, the lending interest rate thereon must be borne by the parent companies) shall be accounted into business expenses in the period, recording:

Debit Account 635 - Financial expenses

Credit Accounts 111, 112, 335, 338.

5.3. Restructuring investment capital, legal capital:

In the course of their operation, enterprises may restructure their investment capital and/or legal capital when there are changes in the objectives or scales of projects, partners, capital-contributing modes and other cases under decisions of the Managing Boards and with the approval of the investment-licensing agencies.

Upon restructuring the legal capital and/or changing the capital-contributing percentages of the parties, which leads to the increase or decrease of the legal capital, under decisions of the Managing Boards and with the approval of the investment-licensing agencies:

- In cases of entering the increase of legal capital, based on the actually contributed capital amounts (at the exchange rate into Vietnam dong, or into foreign currencies approved by the Finance Ministry at the time of capital contribution), recording:

Debit Account 111, 112,�

Credit Account 411 - Business capital sources

- In case of entering the decrease of legal capital, based on the legal capital amounts reduced by the capital-contributing parties (with the agreement of the Managing Boards and the approval of the investment-licensing agencies), recording:

Debit Account 411 - Business capital sources

Credit Accounts 111, 112, 211, 213,�

6. Accounting of establishment expenses, the land use right, construction investment expenses, pre-operation expenses, test-run expenses, trial production expenses

6.1. Accounting of establishment expenses

The expenses for establishment of enterprises are actual expenses related directly to the preparation for the emergence of the enterprises and considered by the founding members as part of the contributed capital of each party and recorded in the charter capital of the enterprises, including expenses for research, exploration, elaboration of investment projects on setting up the enterprises, project evaluation expenses, founding meetings� These expenses shall be calculated to the time the enterprises get the investment licenses and considered long-term prepaid expenses. The establishment-related expenses must be evidenced with lawful and valid vouchers. The time for distribution of establishment expenses shall be 5 years at most. Enterprises should restrict the division of profits equivalent to the value of establishment expenses not yet distributed.

- When the expenses for establishment of enterprises are considered by the founding parties part of the contributed capital of each party and recorded in the charter capital of the enterprises, recording:

Debit Account 242 - Long-term prepaid expenses (detailed establishment expenses)

Credit Account 411 - Business capital sources.

6.2. Accounting of the land use right

When the Vietnamese parties contribute capital with the land use right considered intangible assets and recorded as follows:

Debit Account 213 - Intangible fixed assets (2131- Land use right)

Credit Account 411 - Business capital sources

6.3. Accounting of construction investment expenses

6.3.1. Principles for accounting of construction investment expenses:

When enterprises implement investment projects on new constructions or expansion, upgrading of workshops, architectural objects; procurement and installation of machinery and equipment, they shall have to account fully, timely and separately the investment expenses on Account 241- Unfinished capital construction.

The expenses directly related to the process of capital construction include: Expenses for raw materials and materials, labor, expenses for use of machinery, general expenses (expenses for administrative management, wages, depreciation of fixed assets used directly for the operation of the investment project-managing boards,�) for the work of construction or the installation of machinery and equipment according to the approved technical blueprints.

The capital construction shall be carried out by mode of contractual assignment or self-help.

Upon the completion of the investment process, enterprises shall have to settle the projects and determine the value of assets formulated after the investment. The assets formulated after the investment shall include tangible fixed assets, intangible fixed assets, circulating assets and expenses calculated into business result reports.

l The investment expenses calculated into the value of tangible assets being houses, architectural objects, include: Construction expenses (according to construction contracts, or direct expenses for the performance of the construction volume), expenses for designs, elaboration of project estimates, expenses for construction ground, expenses distributed by the investment project-managing boards.

l The investment expenses calculated into the value of tangible assets being machinery and equipment include the value of machinery and equipment (purchase prices, freight, import tax, if any, customs fees,�), expenses for installation, test-run (if any), expenses distributed by the investment project-managing boards.

l The investment expenses calculated into the value of intangible assets include land-related expenses (compensation, ground clearance, leveling and fill-up of construction grounds,�).

l The investment expenses calculated into the value of circulating assets include: the value of raw materials and materials, instruments, tools (failing to reach the standards for being fixed assets) accompanying equipment in complete set (if any).

l Other investment expenses calculated promptly or distributed gradually into business result report include: Expenses for training of workers, personnel, managerial officials in the project investment period; expenses for production and business preparation in service of operation of the projects when the investment period ends and the production and business operations commence.

l The exchange rate differences arising in the course of investment and the differences arising from the re-evaluation of money items of foreign currency origins in the investment period shall not be calculated into the value of tangible and intangible assets, circulating assets but accounted separately and handled according to Point 1.2- Accounting of exchange rate differences and handling of exchange rate differences of Section III, Part II of this Circular.

Enterprises should restrict the division of profits equivalent to the value of undistributed investment expenses awaiting the carry-over.

Other expenses arising in the course of capital construction investment, not directly related to the formation of fixed assets, must be reflected into the business result reports.

6.3.2. Accounting of expenses for implementation of construction investment:

- When expenses directly related to the process of capital construction for formation of fixed assets by mode of self-help or contractual assignment arise, they shall be recorded:

Debit Account 241 - Unfinished capital construction

Credit relevant Accounts

- When settling the projects, based on the approved settlement reports, recording the increase of fixed assets formulated through capital construction investment:

Debit Account 211 - Tangible fixed assets (workshops, architectural objects, machinery and equipment)

Debit Account 213 - Intangible fixed assets (land use right: Expenses related to construction land,�)

Debit Account 242 - Long-term prepaid expenses (investment expenses gradually distributed)

Debit Accounts 152, 153,�

Credit Account 241 - Unfinished capital construction

* Caution: In the process of construction investment, the arising expenses not directly related to the formation of fixed assets shall not be included into the investment expenses for project implementation but reflected into the enterprise management expenses and carried over into the business result report of the fiscal year, recording:

- When expenses not related to construction investment activities arise, recording:

Debit Account 642 - Enterprise management expenses

Credit relevant Accounts

- Carrying over these expenses into the business result reports at the end of the accounting period, recording:

Debit Account 911 - Determining the business results

Credit Account 642 - Enterprise management expenses

6.4. Accounting of pre-operation expenses:

a) The pre-operation expenses include the actually arising expenses related to the work of training (training of workers, technicians, managerial officials,�) and production preparation (work of preparing apparatuses,�). These expenses often arise in the period of preparation for production and business, putting the completed investment assets to use. If these expenses are related to many business periods and large, the enterprises may distribute them into the subsequent years for a maximum duration of 3 years. Enterprises should restrict the division of profits equivalent to the value of undistributed pre-operation expenses.

b) Accounting of pre-operation expenses

- When pre-operation expenses not related to many periods actually arise, recording:

Debit Account 642 - Enterprise management expenses

Credit relevant Accounts

- Then carrying over the pre-operation expenses into business result reports in the period, recording:

Debit Account 911 - Determining business results

Credit Account 642 - Enterprise management expenses

- When pre-operation expenses related to the work of training and preparation for production activities arise, enterprises may reflect them into Account 242- Long-term prepaid expenses and distributed into subsequent accounting period:

l When pre-operation expenses arise, recording:

Debit Account 242 - Long-term prepaid expenses

Credit relevant Accounts.

l When these pre-operation expenses are distributed into subsequent business periods, recording:

Debit Account 642 - Enterprise management expenses

Credit Account 242 - Long-term prepaid expenses.

6.5. Accounting of expenses for and turnover of test-run, trial production

6.5.1. Principles for accounting of expenses for test run, expenses for trial production, turnover of the sale of products or services in the period of test-run, trial production.

If in the period of construction investment of enterprises there are (charge or non-charge) test-runs of the entire production chain, or trial production before officially starting production and business as prescribed in the economic and technical blueprints of the investment projects (excluding test-run of single machines, which shall be conducted by the installers), the expenses for test-runs, trial production shall be accounted as follows:

Where the expenses arising in the period of test-run or trial production are not large, the expenses for test-run or trial production and the proceeds from the sales in this period shall be accounted right into the business result report of the fiscal year. These expenses for test-run, trial production shall be gathered into relevant expense accounts and included into the cost prices of sold goods of the fiscal year. The amounts earned from service provision or product sale shall be recognized as turnover of the fiscal year. This turnover (if any) must also comply with the provisions of the current Laws on VAT and Enterprise Income Tax.

Where the expenses arising in the period of test runs or trial production are large while the proceeds from the sale of products turned out through test-runs or trial production are minimal, such expenses, after being offset by the proceeds, shall be accounted into Account 242- Long-term prepaid expenses of the accounting balance sheet and calculated into the business result report of the subsequent fiscal year for a maximum duration of 3 years. The amounts earned in the period of test run must also be subject to the VAT Law.

The turnover in the period of trial production must comply with the provisions of the VAT Law and shall be deducted from the expenses in the period of trial production.

6.5.2. Accounting of expenses for, turnover of test runs, trial production

a) Accounting of expenses for test runs, trial production:

a1) Accounting of expenses for test runs, trial production

- When expenses arise in the period of test run, trial production, the accountants shall record:

Debit Account 621, 622, 627

Credit Accounts 152, 153, 334, 338, 214, 111, 112, 331,�

- When carrying over expenses to gather test-run, trial-production expenses arising in the period, recording:

Debit Account 154 - Unfinished production, business expenses

Credit Accounts 621, 622, 627

- Warehousing finished products (if any), recording:

Debit Account 155 - Finished products

Credit Account 154 - Unfinished production, business expenses

a2) Where the test-run, trial production expenses are recorded into business result reports

l When delivering finished products of the trial production for sale, trade promotion, or carrying over test-run, trial-production expenses into the business result reports in the period, recording:

Debit Account 632 - Cost prices of sold goods

Credit Accounts 154, 155

a3) In case of recording the actually arising test-run or trial-production expenses after being offset by amounts collected in this period into Account 242- Long-term prepaid expenses of the accounting balance sheet and calculated into business result report for a maximum duration of 3 years:

l At the period-end, recording the expenses actually arising in the period of test run, trial production into Account 242- Long-term prepaid expenses of the accounting balance sheet, recording:

Account 242 - Long-term prepaid expenses

Credit Account 154 - Unfinished production and business expenses

Or, warehousing finished products of the trial production (if any), recording:

Debit Account 155 - Finished products

Credit Account 154 - Unfinished production and business expenses

l When enterprises sell products of the trial production, the accountants shall carry over the cost value of finished products of the trial production, which are sold, into the business result reports in the period, recording:

Debit Account 632 - Cost prices of sold goods

Credit Account 155 - Finished products

l When distributing expenses in the period of test run, trial production into the business expenses in the period in compatibility with the turnover of the sale of products of the trial production, or distributing them within the maximum time limit of 3 years, recording:

Debit Account 632 - Cost prices of sold goods

Credit Account 242 - Long-term prepaid expenses

b) Accounting of turnover of the sale of trial-production products (if any):

In the process of test run, trial production, the turnover from sale of trial-production products may arise:

b1) Where enterprises account turnover of the sale of the trial-production products into business result reports in the period:

When selling products turned out from trial production, recording the turnover:

Debit Accounts 111, 112, 131,�

Credit Account 511 - Turnover of goods sale and service provision

Credit Account 333 - Taxes and amounts payable to the State budget (33311)

b2) Where enterprises offset the turnover of the sale of products of trial production with the test-run, trial-production expenses reflected on Account 242- Long-term prepaid expenses of the accounting balance sheet, recording:

Debit Account 511 - Turnover of goods sale and service provision

Credit Account 242 - Long-term prepaid expenses.

c) Determining the business results with the sale of products of trial production:

- Carrying over net turnover, recording:

Debit Account 511 - Turnover of goods sale and service provision

Credit Account 911 - Determining business results

- Carrying over the cost prices of products of trial production, recording:

Debit Account 911 - Determining business results

Credit Account 632 - Cost prices of sold goods

- Determining profits, losses of trial-production activities, recording:

l In case of profits, recording:

Debit Account 911 - Determining business results

Credit Account 421 - Undistributed profits.

- In case of losses, recording:

Debit Account 421 - Undistributed profits

Credit Account 911 - Determining business results.

7. Recording legal capital, re-evaluating assets, preserving legal capital contributed in foreign currencies

7.1. Recording legal capital, re-evaluating assets

Where enterprises use Vietnam dong as the currency for book-keeping entries, when actually receiving the legal capital contributed in foreign currencies, they must convert them into the currency used for book-keeping entries at the official exchange rates announced by Vietnam State Bank at the time of conversion. Enterprises must not re-evaluate their legal capital and asset value after they are actually contributed and converted into Vietnam dong for book-keeping entries.

- When actually receiving the contributed legal capital in foreign currencies, machinery and equipment, workshops, other constructions, industrial property right value, technical know-how, technical process, technical services with value in foreign currencies converted into the currency used for book-keeping entries, recording:

Debit Accounts 111 (1111), 112 (1122), 211, 213,�

Credit Account 411 - Business capital sources

7.2. Preserving legal capital:

Enterprises shall preserve legal capital according to the value of contributed legal capital acknowledged in the investment licenses in foreign currencies from the after-enterprise income tax profits by way of setting up the financial reserves from the after-tax profits, to be decided by the enterprises, recording:

Debit Account 421 - Undistributed income

Credit Account 415 - Financial reserve fund.

8. Accounting of cases of division, separation, consolidation, merger, investment transformation (referred collectively to as reorganization of enterprises)

8.1. Accounting of activities of division, separation, merger, consolidation of enterprises

8.1.1. Activities of division, separation, merger or consolidation of enterprises:

Foreign-invested enterprises; parties to business cooperation contracts shall, in the process of operation, be allowed to change form of investment, carry out division, separation, merger or consolidation of enterprises (Article 19a - Foreign Investment Law)

Activities of consolidation, merger, division, separation of enterprises, change of investment form (referred collectively to as reorganization of enterprises) must be approved by the licensing agencies. The new enterprises shall inherit the rights and obligations of the former enterprises (Articles 31, 32 of Decree No. 24/2000/ND-CP of July 31, 2000 of the Government)

l After the division, the divided enterprise shall terminate all its civil rights and obligations and transfer them to the new enterprises under decision on division of the enterprise in conformity with the operating purposes of the enterprise.

l After the separation, the concerned enterprises shall exercise their rights and perform their obligations in conformity with their operating purposes.

8.1.2. Principles for and methods of book-keeping accounting in cases of consolidation, merger and division of enterprises:

a) Principles for accounting upon the consolidation, merger or division of enterprises:

- For consolidated or merged enterprises, they must record in the accounting books the decrease of the entire assets, debts and capital sources for transfer thereof to the new enterprises.

- For enterprises newly formulated from the consolidation or merging enterprises:

l Including in their business result reports also the results of business operation of the consolidated or merged enterprises.

l Recording in their accounting books the entire assets, debts and capital sources of the merged enterprises, including goodwill and negative goodwill arising from the merger.

b) Accounting of activities of consolidating, merging or dividing enterprises:

- At the consolidated, merged or divided enterprises, based on the reports on transfer of assets, debts and capital sources of the owners to the new enterprises, recording:

Debit Account 411, 331, 311, 333, 338, 334, 335, 214,�

Credit Accounts 111, 112, 131, 141, 151, 152, 153, 154, 155, 156, 211, 213,�

- At the new enterprises, based on the reports on transfer of assets, receivable debts, payable debts, capital sources of owners from the former enterprises, recording:

Debit Accounts 111, 112, 131, 141, 151, 152, 153, 154, 155, 156, 211, 213,�

Debit Account 242 - Long-term pre-paid expenses

(Expenses for goodwill)

Credit Accounts 411, 331, 311, 333, 338, 334, 335,�

Credit Account 3387 - Negative goodwill turnover.

8.1.3. Accounting in cases of separation of enterprises:

The separated enterprises shall record the decrease for the assets, debts and capital sources to be transferred to the new enterprises. The new enterprises shall record the increase of assets, debts and capital sources under the decisions on separation of enterprises in conformity with the divided rights and obligations.

- The separated enterprises shall, based on the reports on transfer of assets, debts and capital sources of owners to the new enterprises, record:

Debit Account 411 - Business capital source, or

Debit Accounts 331, 311, 341, or

Debit Account 214 - Tear and wear of fixed assets

Credit Accounts 111, 112, 131, or

Credit Accounts 211, 213

- The new enterprises shall, based on the reports on transfer of assets, debts and capital sources of owners from the separated enterprises, record:

Debit Accounts 111, 112, 131

Debit Accounts 211, 213

Credit Account 411 - Business capital sources, or

Credit Accounts 331, 311, 341

8.2. Accounting of activities of transferring contributed capital

8.2.1. Activities of transferring contributed capital:

The parties to joint-venture enterprises or the investors in enterprises with 100% foreign capital may transfer the values of their contributed capital portions in the enterprises. Where the capital transfer generates profits, the transferors shall have to pay enterprise income tax (Article 34, the Foreign Investment Law).

8.2.2. Accounting principles:

a) Where the capital portions are transferred among investors being co-capital contributors in the enterprises, the expenses related to the transfer activities of the parties shall not be accounted on the enterprises� books but only the procedures shall be carried out for the change of owners� names in the business licenses.

b) Where a party (the Vietnamese or foreign party) repurchases the capital portion of the other party to a joint venture in order to become the sole owner of the enterprise, the purchase of contributed capital portion should be accounted according to charge rates, namely the equivalent cash amounts and the purchaser may record the expenses for the purchase of this capital portion (which may be higher or lower than the book values of the transferred capital portion) on the day of transfer.

- Where the purchase expense is higher than the book value, the difference shall be accounted as a goodwill and recognized as the intangible asset and distributed according to the estimated useful duration of use and the straight-line method.

- Where the purchase expense is smaller than the portion owned by the enterprise in the equivalent value of purchased assets and debts determined on the day of exchange, the equivalent value of these non-money assets should be recorded as corresponding decrease till the difference no longer exists. Where the difference cannot be fully eliminated by way of recording the decrease of the equivalent value of non-money assets, the remaining difference should be reflected as a negative goodwill and accounted as the retained income. This difference portion should be recognized as income within a duration of no more than 5 years, except where for plausible reasons it shall be distributed within a longer duration which, however, must not exceed 20 years as from the date of buying the enterprise.

8.2.3. Methods of accounting the transfer of contributed capital:

a) The accounting of transactions related to activities of transferring contributed capital in cases where a party (the Vietnamese or foreign party) re-purchases the contributed capital of the other party in order to become the sole owner of the enterprise shall be the same as the accounting in cases of consolidation, merger or division of enterprises in Item 8.1.2- b.

b) In particular cases where the Vietnamese party transfers its contributed capital portion to the foreign party to a joint-venture enterprise and returns the land use right in order to switch to the form of land lease, the decrease must be recorded for the land use right and for the legal capital corresponding to the recorded decrease of the land use right; when the foreign party actually pays the land rents, the increase of owners� corresponding capital shall be recorded.

- When returning the contributed capital with the land use right of the Vietnamese party, recording:

Debit Account 411 - Business capital sources

Credit Account 213 - Intangible fixed assets (2131- Land use right)

- When the enterprise receives money from the foreign party as the land rent payment (as the foreign party re-purchases the Vietnamese party�s capital portion contributed with the land use right and shift to the form of land lease), and concurrently records the increase of the actually contributed legal capital of the foreign party corresponding to the value of the re-purchased contributed capital portion of the transferor, or records the increase of borrowed amounts, long-term debts if the borrowed amounts or foreign debts transferred into Vietnam for payment of the land rent, recording:

Debit Accounts 11, 112, 242

Credit Accounts 411, 341, 342.

9. Accounting of investment in construction, procurement of fixed assets in activities of business cooperation and performance of business cooperation contracts

9.1. Organizing the accounting of activities of performing the business cooperation contracts

Business cooperation contracts are documents signed between two or more parties for investment and business in Vietnam, which define the responsibility and divided business results of each party without setting up new legal persons.

The accounting work can be performed in one of the following forms, depending on the agreement reached between the parties to the business cooperation contracts.

l Proceeds from liquidation, sale of fixed assets, recording:

Debit Accounts 111, 112, 138

Credit Account 711 - Other incomes

Credit Account 333 - Taxes and amounts payable to the State (33311)

l The remaining value of fixed assets and actually arising liquidation or sale expenses, recording:

Debit Account 811 - Other expenses

Credit Account 211 - Tangible fixed assets (the remaining values)

Credit Accounts 111,112, 331,�( arising liquidation expenses)

10. Accounting of the operation of assigning and accepting the product processing in the contractual business cooperation activities

- Upon the delivery of raw materials and materials for processing, recording:

Debit Account 331 - Payable to sellers

Credit Account 152 - Raw materials, materials

- Upon receiving back the processed products, recording:

Debit Account 621 - Direct raw materials, materials expenses

Credit Account 331 - Payable to sellers.

- Accounting of expenses for depreciation of fixed assets (equipment, workshops) built on other people�s land for the performance of business cooperation contracts (if any), recording:

Debit Account 627 - General production expenses (6274)

Credit Account 214 - Tear and wear of fixed assets (2141)

- Accounting of other expenses related to processing activities, recording:

Debit Account 627 - General production expenses

Credit Accounts 111, 112

- General accounting of production expenses and calculating the costs of processed products shall be effected as for other products of the enterprises under the enterprises� accounting regime.

11. Accounting of turnover of golf course business, infrastructure dealing, assets leasing for many years (operation leasing), entrusted import

11.1. Accounting of business in golf course, real estate leasing, asset leasing:

Where golf course dealing, real estate leasing and/or asset leasing activities generate turnover collected in advance for many years, the turnover must be memorized according to fiscal years:

a) For unimplemented turnover:

a1) Unimplemented turnover accounted in Account 3387- Unimplemented turnover

- Upon receipt of money paid in advance for many periods by customers, the accountants record:

Debit Accounts 111, 112

Credit Account 3387 - Unimplemented turnover

Credit Account 3331 - Payable VAT (33311)

At the same time determine the turnover of the accounting period, recording:

Debit Account 3387 - Unimplemented turnover

Credit Account 511 - Turnover of goods sale and service provision (5113)

- Upon paying VAT on the actually collected amounts of multi-year turnover (with input VAT of the accounting period deducted), recording:

Debit Account 3331 - Payable VAT- (33311)

Credit Accounts 111, 112.

- Upon determining the enterprise income tax payable in the fiscal year, recording:

Debit Account 421 - Undistributed profits (Income liable to enterprise income tax)

Credit Account 333 - Taxes and amounts payable to the State (3334)

a2) When actually paying the enterprise income tax (for each period, or the rest), recording:

Debit Account 333 - Taxes and amounts payable to the State (3334)

Credit Accounts 111, 112

a3) Into the subsequent fiscal year, determining the current year�s turnover of lump-sum cash collection (in the preceding fiscal year) in compatibility with the accounting period (month, quarter), recording:

Debit Account 3387 - Unimplemented turnover

Credit Account 511 - Turnover of goods sale and service provision (5113)

- Carrying over turnover to determine business results in the period, recording:

Debit Account 511 - Turnover of goods sale and service provision (5113)

Credit Account 911 - Determining business results

b) For business expenses of these activities:

Only accounting in business expenses in the period the actually arising expenses:

- Upon depreciation of tangible and intangible fixed assets into expenses, recording:

Debit Account 627 - General production expenses (6274)

Credit Account 214 - Tear and wear of fixed assets (2141, 2143)

- When expenses directly related to the process of business operation arise, recording

Debit Accounts 621, 622, 627

Debit Account 133- Deducted VAT

Credit Accounts 152, 331, 334, 338, 111, 112,�

- At the end of the accounting period, carrying over the expenses directly related to the activities of enterprises, which are gathered on Accounts 621, 622, 627, recording:

Debit Account 154 - Unfinished production and business expenses

Credit Accounts 621, 622, 627

- Determining the cost values of services completely provided in the period, recording:

Debit Account 632 - Cost prices of sold goods

Credit Account 154 - Unfinished production and business expenses

- Carrying over the cost values of services completely provided in the period in order to determine the business results in the period, recording:

Debit Account 911 - Determining business results

Credit Account 632 - Cost price of sold goods.

- Goods sale expenses and enterprise management expenses shall be accounted into Accounts 641, 642. At the period-end, they shall be forwarded into Account 911 in order to determine the business results in the period.

c) Long-term, short-term deposits of customers shall be credited to Accounts 344, 338 (3388)

- Upon the receipt of long-term, short-term deposits of customers, the accountants record:

Debit Accounts 111, 112

Credit Account 344 - Receipt of long-term security, deposit (long-term deposit)

Credit Account 338 - Other payable, remittable (3388) (short-term deposit)

- When refunding deposits to customers, the accountants record:

Debit Accounts 344, 338 (3388)

Credit Accounts 111, 112

- Fines for contractual breaches shall be subtracted from deposits, recording:

Debit Accounts 344, 338 (3388)

Credit Account 711 - Other income

11.2. Accounting of activities of dealing in infrastructure in industrial parks, export-processing zones and hi-tech parks:

- Activities of dealing in infrastructure mean activities of transferring land or subleasing land with infrastructure already developed thereon and providing electricity, water (if any) supply, public-utility,� services in industrial parks, export-processing zones and hi-tech parks,�

- Foreign-invested enterprises and business cooperation parties, which lease or sublease land in industrial parks, export-processing zones, hi-tech parks (receiving transferred land), shall be granted the land use certificates under the guidance of the General Land Administration.

- Infrastructure business turnover includes: Turnover of transfer or sublease of land with developed infrastructure and turnover of infrastructure service provision (public-utility and preservation and maintenance charges).

- The principle for recording turnover of transfer or sublease of land with developed infrastructure is the lump- sum payment by method of " land plot", namely the turnover shall be recorded when land is transferred to the lessees on the field and the rent is paid in lump sum.

- The principle for recording service provision turnover (public utility and preservation and maintenance charges) according to the provisions in Paragraph 16 of Standards for turnover and other income- Standard No.14.

- Enterprises dealing in infrastructure must fulfill their tax obligations related to turnover of leasing or subleasing land with developed infrastructure and service provision turnover according to current regulations.

- The expenses related to infrastructure "land plots" already transferred to the users (the lessees) and the lump-sum rent collection shall be recorded according to the principle that expenses must conform to turnover.

11.2.1. Accounting of the receipt of contributed capital for infrastructure business:

- Upon the receipt of capital contributed in the land use right from the time of handing over the land on the field for infrastructure business, recording:

Debit Account 228 - Other long-term investment (detail- infrastructure land)

Credit Account 411 - Business capital sources

- Upon receipt of capital in cash, machinery, equipment, other fixed assets,�, recording:

Debit Accounts 111, 112, 211

Credit Account 411 - Business capital sources.

11.2.2. Accounting of the process of investment in the construction of infrastructure;

- When the land-related expenses, such as compensation expenses, ground clearance expenses, ground leveling, fill-up expenses,� arise, recording:

Debit Account 241 - Unfinished capital construction

Debit Account 133 - Deducted VAT (if any)

Credit Accounts 111, 112, 152, 153, 331,�

- Upon the completion of infrastructure construction and the approval of final settlement, recording:

Debit Account 211 - Tangible fixed assets (buildings, architectural objects- fixed assets in general service of infrastructure business activities- If any).

Debit Account 242 - Long-term prepaid expenses (if any)

Debit Account 228 - Other long-term investment (buildings, architectural objects, infrastructure projects on land, land already invested with infrastructure for the purpose of leasing land already with developed infrastructure)

Credit Account 241 - Unfinished capital construction.

11.2.3. Accounting of actually arising expenses for investment activities of developing infrastructure land and expenses for service provision (water, electricity (if any), public-utility and preservation and maintenance):

11.2.3.1. Accounting of the cost value of land with infrastructure already developed for lease:

When leasing infrastructure, transferring the leased land areas to the infrastructure lessees:

- Determining the cost value of the "land plot" with infrastructure already developed for lease (the land use right, land-related expenses for formation of land with developed infrastructure, fixed assets, architectural objects closely associated to the leased land- if any), recording:

Debit Account 635 - Financial expenses

Credit Account 228 - Other long-term investment (infrastructure land,�)

11.2.3.2. Accounting of expenses for electricity, water (if any) supply, public utility, infrastructure preservation and maintenance services provided to the infrastructure lessees:

- When the direct expenses for the provision of water, electricity (if any) supply, public- utility, infrastructure preservation and maintenance,� services arise, recording:

Debit Accounts 621, 622, 627

Credit Accounts 152, 153, 331, 334, 338, 111, 112,�

- Carrying over expenses directly related to services in order to rally business expenses and calculate the charges for electricity, water (if any) supply, public-utility and infrastructure preservation and maintenance services, recording:

Debit Account 154 - Unfinished production, business expenses (detailed according to services)

Credit Accounts 621, 622, 627

- Determining the cost prices of infrastructure services provided to customers, recording:

Debit Account 632 - Cost prices of sold goods

Credit Account 154 - Unfinished production, business expenses.

11.2.3.3. Accounting of goods sale expenses, enterprise management expenses:

- When the goods sale (advertisement, sale promotion,�) expenses and enterprise management expenses arise, recording:

Debit Account 641 - Goods sale expenses

Debit Account 642 - Enterprise management expenses

Credit Accounts 152, 153, 331, 334, 338, 214, 111, 112,�

11.2.3.4. Determining and carrying over the cost value of the leased infrastructure "land plots", the cost prices of infrastructure services, goods sale expenses, enterprise management expenses so as to determine the business results:

- Determining the cost value of infrastructure land leased in the period, recording:

Debit Account 635 - Financial expenses

Credit Account 228 - Other long-term investment

- Determining the cost value of infrastructure services provided in the period, recording:

Debit Account 632 - Cost prices of sold goods

Credit Account 154 - Unfinished production, business expenses

- Carrying over the cost value of transferred or subleased infrastructure land and expenses for infrastructure services provided in the period in order to determine the business results in the accounting period, recording:

Debit Account 911 - Determining business results

Credit Account 632 - Cost prices of sold goods

Credit Account 635 - Financial expenses

- Carrying over goods sale expenses and enterprise management expenses in order to determine the business results, recording:

Debit Account 911 - Determining business results

Credit Accounts 641, 642

11.2.3.5. Accounting of infrastructure business turnover:

- Turnover of leased or subleased land with developed infrastructure shall be calculated on the leased land areas ("land plots") and the land-leasing duration:

l The turnover of transfer or sublease of land with infrastructure already developed ("land plots"), with lump-sum rent collection, recording:

Debit Accounts 111, 112

Credit Account 515 - Financial operation turnover

Credit Account 333 - Taxes and amounts remittable to the Budget {3331- Payable VAT (33311)} (not calculated on land rent)

- Turnover of transfer or sublease of land with developed infrastructure ("land plots"), which are returned (if any), recording:

Debit Account 333 - Taxes and amounts remittable to the Budget (33311)

Debit Account 531 - Sold goods which are returned

Credit Accounts 111, 112, 138, 338 (3388)

- Carrying over turnover of transferred or subleased land ("land plots") which are returned (if any), recording:

Debit Account 515 - Financial operation turnover

Debit Account 3331 - Payable VAT (33311) ( if any)

Credit Account 531 - Sold goods returned

- Infrastructure service provision turnover, recording:

Debit Accounts 111, 112, 131

Credit Account 511 - Goods sale and service provision turnover (5113)

Credit Account 3331 - Payable VAT ( 33311)

- Collected fines for contractual breaches, recording:

Debit Accounts 111, 112, 138

Credit Account 711 - Other income

- Carrying over net turnover, other incomes to determine the business results, recording:

Debit Accounts 511, 711

Credit Account 911 - Determining business results

- Determining infrastructure business results (land lease, service provision):

l Business profits, recording:

Debit Account 911 - Determining business results

Credit Account 421 - Undistributed profits

l Business losses, recording:

Debit Account 421 - Undistributed profits

Credit Account 911 - Determining business results

11.3. Accounting of entrusted import activities

11.3.1. Units which carry out import activities through import-entrusting contracts- Called the import-entrusted party (called B1 for short) shall account the contents: The receipt of the value of equipment under the original entrusted import contracts; expenses related to equipment, import goods (expenses for renting warehouses and/or storing yards, expenses for transportation of imported goods, customs fees, import tax, VAT on import goods,�); the receipt of supplementary equipment, goods under the entrusting contracts due to changes in equipment structure or changes in design of equipment installation in the signed contracts,�{The value of these supplementary equipment and all accompanied expenses (for rent of warehouses and/or storing yards, expenses for transportation of entrusted-import goods, customs fees, import tax, VAT on import goods,�)} shall be fully borne by the equipment and/or goods sellers; the receipt of money amounts of the entrusting parties for payment on the latter�s behalf: The money for purchase of import goods, including freight, imported goods insurance, import tax, VAT(if any) on imported goods, customs fees,...; the transfer of entrusted-import equipment and goods, including supplementary imported equipment and goods, to the entrusting parties and collect commissions for the entrusted import, as follows:

a) When importing the entrusted-import equipment, goods

a1) Accounting of the value of equipment, goods according to the import-entrusting contracts; expenses related to imported goods and equipment (expenses for renting warehouses, storing yards, expenses for domestic transportation of entrusted-import goods, import tax, VAT on import goods, customs fees,�)

- Accounting of the value of entrusted-import goods and/or equipment (according to FOB or CIF prices) and import tax, VAT on import goods, based on relevant vouchers to record:

Debit Account 151 - Purchased goods en route

Debit Account 156 - Goods (1561) (values of equipment, goods and assorted taxes: import tax, special consumption tax, VAT on import goods)

Credit Account 331- Payable to sellers (equipment value according to FOB or CIF price)

Credit Account 333 - Taxes and amounts payable to the State

(3333 - Import tax; 3332 - Special consumption tax;

33312 - Payable VAT on import goods)

a2) Accounting of expenses related to imported goods (expenses for renting warehouses and/or storing yards, customs fees, expenses for domestic transportation of entrusted-import goods,�):

Debit Account 156 - Goods (1562)

Credit Account 331 - Payable to sellers (domestic sellers) (expenses for renting warehouses and/or storing yards, expenses for domestic transportation of entrusted-import goods,�)

Credit Account 333- Taxes and amounts payable to the State (3339) (Customs fees)

a3) Accounting of the receipt of supplementary equipment under the entrusting contract, of which the value and all accompanied expenses (expenses for renting warehouses and/or storing yard, import tax, VAT on imported goods, customs fees, expenses for domestic transportation of entrusted-import goods with regard to the supplementary equipment,�) shall be fully borne by the equipment sellers, recording:

Debit Account 156 - Goods (1561, 1562) (equipment value, import tax and VAT on import goods and accompied expenses)

Credit Account 131 - Receivable from customers (the entrusting party) (the equipment value according CIF prices notified by sellers)

Credit Account 131 - Payable to sellers (domestic sellers) (expenses for renting warehouses and/or storing yards, expenses for domestic transportation of entrusted-import goods,�)

Credit Account 133 - Taxes and amounts payable to the State

(3333 - Import tax; 3332 - Special consumption tax;

33312 - VAT payable on imported goods;

3339 - Customs fees)

b) When the import-entrusted parties receive money from the entrusting parties as payment on the latter�s behalf, such as money for purchase of entrusted-import equipment, including freight, insurance premium for imported goods, customs fees, other expenses related to entrusted-import goods; commission for entrusted import, import tax, VAT on import goods, recording:

Debit Accounts 111, 112

Credit Account 131 - Receivable from customers

c) When settling amounts related to entrusted-import goods lots in cash or bank deposits or the import-entrusted parties are asked to pay import tax on the entrusting parties� behalf as agreed upon, recording:

Debit Accounts 331, 333 (3332, 3333, 33312), 156 (1562)

Credit Accounts 111, 112, 238

d) When the import-entrusted party returns the entrusted-import equipment and/or goods to the import-entrusting party, the procedures therefor prescribed at Point 5.3, Section IV of Circular No. 122/2000/TT-BTC of December 29, 2000 of the Finance Ministry guiding the implementation of the Government�s Decree No. 79/2000/ND-CP of December 29, 2000 which details the implementation of the VAT Law on entrusted import goods must be complied with. Based on sale invoices, the accountants shall enter:

d1) Returning the entrusted-import goods to the import-entrusting party (including goods imported in the first time, or goods imported additionally):

- When returning the entrusted-import goods to the import-entrusting party, based on delivery bills and sale invoices returned to the import-entrusting party, recording:

Debit Account 131 - Receivable from customers (import-entrusting units)

Credit Account 156 - Goods (1561, 1562)

Credit Account 151 - Purchased goods en route

d2) Recording the goods sale turnover (entrusting commission) and payable VAT (calculated on entrusted-import commission enjoyed for the first-time entrusted importation and the additional importation- if any):

Debit Account 131 - Receivable from customers (entrusting units) (if subtracting from amounts already received from the entrusting party)

Credit Account 511 - Goods sale and service provision turnover (entrusted import commission)

Credit Account 333 - Taxes and amounts payable to the State (3331- Payable VAT calculated on enjoyable commission for entrusted import).

11.3.2. At the units entrusting the import under the import-entrusting contracts- Called the import-entrusting party (called B2 for short):

a) Accounting the values of equipment and/or goods and expenses related to entrusted-import equipment and/or goods (import tax, VAT on import goods, customs fees, expenses for renting warehouses and/or storing yards, expenses for transportation of entrusted-import goods,�); delivered equipment for use:

- When transferring money for proxy payment (goods purchase, payment of import tax, VAT on import goods- if any, freight, goods insurance, customs fees,�), or paying taxes as agreed upon with the import-entrusted party, recording:

Debit Account 331 - Payable to sellers (import-entrusted units)

Credit Accounts 111, 112.

- Upon receipt of equipment and/or goods delivered by the import-entrusted party under the import-entrusting contracts, based on sale invoices from the import-entrusted party, recording:

Debit Accounts 152, 211,�

Or Debit Account 156 - Goods (1561,1562)

Debit Account 133 - Deducted VAT (1331, 1332)

Credit Account 331 - Payable to sellers (entrusted party) (regarding amounts payable to the import-entrusted party: goods purchase money, import tax, VAT on import goods, customs fees, expenses for domestic transportation) (entrusted party- if money already transferred for proxy payment in advance).

- When delivering equipment, goods for use in production and/or business activities, recording:

Debit Accounts 157, 211, 241, 621, 632

Credit Accounts 152, 156

- If any equipment delivered for use is broken, for which the equipment suppliers agree to pay material compensations, entering the value of broken equipment, recording:

Debit Accounts 131, 331

Credit Accounts 241, 621, 632

At the same time recording as decrease the deducted VAT amounts for damaged equipment, recording:

Debit Accounts 131, 331

Credit Account 333 - Taxes and amounts payable to the State (3331)

Or Credit Account 133 - Deducted VAT

b) Accounting the receipt of supplementary equipment under the delivery-entrusting contracts, of which all accompanying expenses (expenses for renting warehouses and/or storing yards, import tax, customs fees, expenses for transportation of entrusted-import goods,�) are fully borne by the equipment sellers:

- Based on the invoices of the entrusted party and the actually received goods, recording:

Debit Account 156 - Goods (1561, 1562)

Debit Account 133 - Deducted VAT (1331, 1332)

Credit Accounts 131, 331 (value of compensation equipment)

Credit Account 331 - Payable to sellers (The entrusted party) (Regarding relevant expenses: Import tax, VAT on import goods, customs fees, warehouse and/or storing yard rents, domestic transportation freight, which have been already paid by the entrusted party and must be reclaimed from the sellers, or advanced by the entrusting party).

b1) In cases where all the import tax, VAT on import goods, customs fees and expenses related to the additionally imported equipment have been advanced or paid to the entrusted party, all these expenses (which shall be borne by the sellers, including the value of supplementary equipment) shall later be reclaimed from the sellers.

- When advancing or paying them to the entrusted party, recording:

Debit Account 331 - Payable to sellers

Credit Accounts 111, 112

- Upon receiving the invoices of the entrusted party on payable amounts related to additionally imported equipment, recording:

Debit Account 138 - Other receivables

Credit Account 331 - Payable to sellers (import-entrusted units)

- When actually receiving money repaid by sellers, recording:

Debit Accounts 111, 112

Credit Account 138 - Other receivables

b2) Where the import-entrusting party only receives the equipment and parts thereof via the import-entrusted party while other accompanied expenses of the additionally imported equipment lot shall be reclaimed from the sellers directly by the import-entrusting party, the import-entrusting party shall only receive the sale invoices of B1 acknowledging the value of the paid equipment for making book entries:

Debit Account 156 - Goods (1561, 1562)

Debit Account 133 - Deducted VAT (1331, 1332)

Credit Accounts 138, 331 (value of compensated equipment)

12. Accounting of profit division

- Annually, based on after-enterprise income tax profits and the capital contribution percentage of each party as prescribed in the investment licenses, the enterprises shall determine the profits to be divided to the parties, which shall be approved by the Managing Boards through voting, recording:

Debit Account 421 - Undistributed profits

Credit Account 338 - Other payable, remittable (3388 - Detailed profits distributed to capital- contributing parties)

- Upon the expiry of re-investment duration, the foreign parties transfer abroad the profits divided on enterprise income tax which is reimbursed due to their re-investment, recording:

Debit Account 411 - Business capital sources (Business reinvestment capital sources)

Credit Account 338 - Other payable, remittable (3388 - Detailed profits distributed to the capital-contributing parties).

- When actually paying profits to capital-contributing parties, recording:

Debit Account 338 - Other payable, remittable (3388 - Detailed profits distributed to capital-contributing parties)

Credit Accounts 111, 112

13. Accounting of tax on transfer of profits abroad, reimbursement of enterprise income tax in case of reinvestment, tax on transfer of contributed capital

13.1. Accounting of tax on transfer of profits abroad

- When the foreign parties transfer their divided profits ( including the enterprise income tax refunded due to re-investment and profits earned from capital transfer) to their parent companies or to investors contributing business capital to enterprises overseas, they must pay tax on transfer of profits abroad according to current regulations, recording:

Debit Account 338 - Other payable, remittables (3388 - Detailed profits divided to foreign parties)

Credit Account 333 - Taxes and amounts payable to the State (3338)

- Upon the actual payment of tax on transfer of profits abroad, recording:

Debit Account 333 - Taxes and amounts payable to the State (3338)

Credit Accounts 111, 112

13.2. Accounting of the reimbursement of enterprise income tax in case of reinvestment

When the foreign investors receive the reimbursed amounts of enterprise income tax for reinvestment in projects being executed or in new projects under the Law on Foreign Investment in Vietnam:

- In case of receiving the reimbursed amounts of enterprise income tax for reinvestment in projects being executed, recording:

Debit Account 112 - Bank deposits

Credit Account 411 - Business capital sources (Business capital source for reinvestment).

- In case of receiving the reimbursed amounts of enterprise income tax for reinvestment in new projects, at the enterprises which receive the reimburse tax amount, recording:

Debit Account 112 - Bank deposits

Credit Account 411 - Business capital sources (Business capital sources for reinvestment).

- If the foreign investors fail to use the reimbursed enterprise income tax amounts for reinvestment, they must return those reimbursed tax amounts plus the interests thereon calculated being equal to the loan interest on the returned tax amounts and these operations must not be reflected on the accounting books of the enterprises.

13.3. Accounting of tax on transfer of contributed capital

Where profits are generated from the transfer of contributed capital to the foreign party when a party (the Vietnamese party or the foreign party) repurchases the contributed capital portion of the other party in order to become the sole owner of the enterprise and the purchase of contributed capital portions should be accounted according to charge rates, namely the corresponding cash amount required for the purchasers to be allowed to enter the expenses for such purchase of contributed capital portions (which may be higher or lower than the book values of the transferred capital amounts) made on the date of transfer, the contributed capital transferors with income from the capital transfer must pay tax on income from the transfer of contributed capital. Enterprises shall not account tax on transfer of contributed capitals of the partners.

14. Regarding the appropriation, use and final settlement of prior-deducted expenses for job loss allowances

a) Expenses for job-loss allowances

The expenses for job-loss allowances are amounts to be paid by enterprises to laborers when they quit their jobs according to current regulations of the State.

The job-loss allowances for laborers can be subtracted from the taxable incomes of enterprises according to the provisions in Article 9, Chapter II of the Enterprise Income Tax Law.

Where these expenses are expected to be large upon the expiry of the investment licenses, are related to the implementation of the State�s current regulations for laborers and accord the commitments in the labor contracts signed with the laborers, in principle, the enterprises may make advance deductions from the business expenses of the relevant fiscal years for to each laborer to reserve for these expenses.

The bases for making advance deductions as reserve for job loss allowance expenses for laborers shall be calculated on the amount expected to pay to each laborer according to the State�s current regulations for laborers and the labor contracts signed with laborers. The levels of deduction for setting up this reserve shall not exceed one month�s wages of the laborers on the average payroll of the months in the year.

Annually, the enterprises must clearly settle the advance appropriation and the use of thereof for job-loss allowance for laborers as well as the balance thereof to be carried forward to subsequent fiscal years.

The unused amounts of advance appropriation for job-loss allowance for laborers must be recorded as expense decrease.

b) Accounting of the advance appropriation of expenses for job loss allowance

- When making advance appropriation of expenses for job loss allowance for laborers, which are calculated into business expenses in the period, recording:

Debit Account 642 - Enterprise management expenses

Credit Account 335 - Payable expenses (detailed advance appropriation for job-loss allowances for laborers).

- The unused advance appropriation amounts for job-loss allowance for laborers must be re-entered as decrease of enterprise management expenses, recording:

Debit Account 335 - Payable expenses (detailed advance appropriation for job-loss allowances for laborers)

Credit Account 642 - Enterprise management expenses

15. Regarding the gradual distribution and advance appropriation of expenses for fixed-asset overhauls

a) Expenses for overhaul of fixed assets, advance deduction or gradual distribution of expenses for overhaul of fixed assets

The expenses for overhaul of fixed assets are considered expenditures and accounted directly or distributed gradually into business expenses in the period.

For some particular sectors where the expenses for overhaul of fixed assets arise irregularly among the fiscal years, if enterprises wish to deduct in advance the expenses for overhaul of fixed assets into the current fiscal year while the overhaul of fixed assets will arise in the subsequent fiscal years, they must draw up plans on advance deduction of expenses for overhaul of fixed assets and submit them to the Finance Ministry for consideration and decision. After getting the written approval of the Finance Ministry, the enterprises must notify their direct managing tax offices thereof. The enterprises must settle the actual overhaul expenses against the prior-deducted overhaul expenses; if the actual overhaul expenses are larger or smaller than the prior-deducted expenses, they may additionally calculate them into the business expenses in the period or gradually distribute them (if the actual expenses are larger than the prior-deducted expenses), or return the amounts deducted in excess (if the prior-deducted amounts are larger than the actual expense amounts).

If enterprises of particular sectors apply the method of gradual distribution of fixed-asset overhaul expenses into subsequent business periods, they must also draw up plans for gradual distribution of fixed asset overhaul expenses and notify the direct managing tax offices thereof.

b) Accounting of fixed-asset overhaul expenses, prior-deduction or gradual distribution of fixed-asset overhaul expenses:

- When the fixed-asset overhaul expenses actually arise in the accounting period, recording:

Debit Accounts 627, 641, 642,�

Debit Account 133 - Deducted VAT (1331)

Credit Accounts 111, 112, 152, 153, 334, 338, 331,�

- Where the fixed-asset overhaul expenses are large and related to many accounting periods, the enterprises shall make the gradual distribution of these expenses:

l When the fixed-asset overhaul expenses actually arise in the accounting period, recording:

Debit Account 242 - Long-term prepaid advance (distributed gradually into the subsequent fiscal years)

Debit Account 133 - Deducted VAT (1331)

Credit Accounts 111, 112, 152, 153, 334, 338, 331,�

l When gradually distributing fixed asset overhaul expenses into subsequent business periods, recording:

Debit Accounts 627, 641, 642,�

Credit Account 242 - Long-term prepaid expenses (distributed gradually into subsequent fiscal years)

- Where fixed-asset overhaul expenses arise irregularly among the fiscal years, if the enterprises wish to deduct them in advance into the current fiscal year and the overhaul of fixed assets shall arise in the subsequent fiscal years, they must draw up plans for advance deduction of fixed- asset overhaul expenses and settle the amounts deducted in advance against the actual expense amounts:

l When deducting in advance the fixed-asset overhaul expenses into the expenses of the accounting period, recording:

Debit Accounts 627, 641, 642,�

Credit Account 335 - Payable expenses

l When fixed-asset overhaul expenses actually arise in subsequent business periods, recording:

Debit Account 241 - Unfinished capital construction

Debit Account 133 - Deducted VAT (1331)

Credit Accounts 111, 112, 152, 153, 334, 338, 331,�

l Upon the completion of overhauls, the actual overhaul expenses shall be carried over into Account 335- Payable expenses, recording:

Debit Account 335 - Payable expenses

Credit Account 241 - Unfinished capital construction

l Where the actual fixed-asset overhaul expenses are larger than the prior-deducted amounts, the actual expense surplus shall also be entered:

Debit Accounts 627, 641, 642 (actual expense surplus over the prior-deducted amount)

Debit Account 335 - Payable expenses (equal to the prior-deducted amounts)

Credit Account 241 - Unfinished capital construction (settling the actually arising fixed-asset overhaul expenses).

l Where the actual fixed-asset overhaul expenses are smaller than the prior-deducted amounts, the differences between the prior-deducted amounts and the actual expense amounts must be reimbursed:

Carrying over the actual overhaul expenses, recording:

Debit Account 335 - Payable expenses

Credit Account 241 - Unfinished capital construction (settling the actual fixed-asset overhaul expenses).

Reimbursing the over-deducted amounts for fixed-asset overhaul:

Debit Account 335 - Payable expenses (excessive prior-deducted amounts)

Credit relevant Accounts.

IV. FINANCIAL REPORT

A number of supplements to the methods of making financial reports